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Yield: What it is and Why It Matters

By: Sandy Saburn, CTIE[/caption]As a small business owner, it is important to look at your numbers and consider how they can be improved. As an independent travel advisor, you probably consider commission to be the most important number, and understandably so!But I would argue there is an even more important number to consider that many travel agents don’t know much about: Yield.While commission seems clear cut, it doesn’t give you the real measure of how much money goes into your pocket. You can book the same trip with two different vendors with the same commission rate and yet one will actually pay you more than the other.What?That’s why the yield is so important. Yield is the actual commission you earn on a booking as a percentage of the total sale.Why does it differ from commission? Because not every component of a booking is commissionable. For cruises, there are the infamous “non-commissionable fares” that reduce the amount of the booking that is commissionable – sometimes significantly. With wholesalers, you have air, taxes, and other things that aren’t commissionable. While your commission rate with the vendor might be 16%, the actual yield might be closer to 12%. To find out the yield on a booking, divide the total commission by the total amount of the booking. You don’t have to do this for every booking, but it is important to know what your real numbers are.I took a look at our numbers to give you some examples. This is data from thousands of bookings made over the course of 2021. (Despite what’s going on in the industry, yield has remained pretty much the same as it was in 2019.) Of course, I did not use real vendor names, but each company represented below is a wholesaler that you can book air/hotel/car/transfer packages with (e.g., Classic Vacations, GOGO)

  • Wholesaler A: 14% yield, 16% commission
  • Wholesaler B: 13% yield, 16% commission
  • Wholesaler C: 12% yield, 17% commission
  • Wholesaler D: 11% yield, 17% commission
  • Wholesaler E: 10% yield, 15% commission
  • Wholesaler F: 9% yield, 12% commission

So, why do these numbers vary so dramatically? It is all based on what the wholesaler considers commissionable. There are components of bookings that you know aren’t going to earn you commission: things like taxes and often airfare. But that doesn’t explain it all. Some vendors just configure things differently. Take Vendor D for instance. That doesn’t represent a 6% difference, that is a 65% difference.If you have a booking with that vendor and it is $15,000 and at 17% commission you might think you would earn $2,550, but when non-commissionable items are factored in you only earn $1,650. That’s a difference of 65%.Wholesalers were used in the scenario above, but cruise lines are very similar.

  • Cruise Line A: 16% yield, 18% commission
  • Cruise Line B: 13% yield, 15% commission
  • Cruise Line C: 12% yield, 15% commission
  • Cruise Line D: 11% yield, 15% commission
  • Cruise Line E: 10% yield, 15% commission
  • Cruise Line F: 9% yield, 12% commission

Notice that four cruise lines (B, C, D, and E) all have a commission level of 15%, but their yields range from 10% to 13%. That’s a big difference! On a $15,000 cruise booking that would mean you would earn a high of $1,950 to a low of $1,500 – a difference of $450. Multiply that by the number of cruise bookings you do each year and you’ll see what a difference it makes.As a travel advisor, what can you do about this? The first thing to do is to be aware. If you keep a spreadsheet with your bookings, I encourage you to add a column to calculate the yield.Once you get a firm handle on where you are actually making the most money, reward that vendor with your bookings. You will often find that the mass market and low-cost vendors are the ones that have the highest level of non-commissionable inclusions and therefore the lowest yields. Where do you think those discounts come from? That’s right, your commission!If more travel advisors become aware of their numbers and have business conversations with their vendor partners, it will improve the amount of money everyone in the industry is making!I am sure many of you feel like you don’t have time for this, but as an independent travel advisor you are an entrepreneur. And numbers matter to entrepreneurs to ensure so you are working smart, not just hard. In the long run, it will be very beneficial for you and your business!